2017 (5) TMI 146 - HC - Central Excise

Invalidity of Show Cause Notice without Commissioner's Approval under Central Excise Act

Thermo Electric Furnaces Versus Commissioner of Central Excise, Chennai

Thermo Electric Furnaces Versus Commissioner of Central Excise, Chennai - 2017 (351) E.L.T. 225 (Mad.) Issues Involved:1. Jurisdiction to issue the Show Cause Notice (SCN).2. Alleged suppression of manufacture warranting invocation of the extended period under Section 11A of the Central Excise Act.3. Whether the demand is barred by limitation.4. Failure to appreciate the appellant's defense in its reply dated 06.03.2001.Detailed Analysis:1. Jurisdiction to issue the Show Cause Notice (SCN):The appellant contended that the SCN was not issued by a competent authority, asserting that only the Commissioner of Central Excise could issue such a notice for the extended period. The Joint Commissioner issued the SCN, which the appellant argued was invalid without explicit approval from the Commissioner. The court noted that the Joint Commissioner’s assumption that the SCN was valid merely because it was stated to be approved by the Commissioner was flawed. The court emphasized the necessity for the Joint Commissioner to provide concrete evidence of such approval, as required by Section 11A(1) of the Act. The court found that the authorities below failed to address this jurisdictional challenge adequately, which goes to the root of the matter.2. Alleged suppression of manufacture warranting invocation of the extended period under Section 11A of the Central Excise Act:The appellant argued that there was no active suppression of facts, and the mere cutting of wires did not amount to manufacture. The court observed that the Tribunal failed to provide specific findings on whether the act of cutting wires constituted manufacture and whether the goods were marketable. The court noted that the Tribunal relied on the partner's statement without adequately addressing the appellant's defenses. The court emphasized that a charge of suppression must be specific and substantiated by relevant material, which was not sufficiently demonstrated in this case.3. Whether the demand is barred by limitation:The appellant contended that the demand was barred by limitation as the SCN was not served within six months from the material period. The court found that the Tribunal primarily focused on the limitation issue and the aspect of whether cutting wires amounted to manufacture. However, it did not adequately address other critical issues raised by the appellant, such as the marketability of the goods and the inclusion of tailor-made items in the aggregate value of clearances.4. Failure to appreciate the appellant's defense in its reply dated 06.03.2001:The appellant argued that the authorities failed to consider its detailed defense, including the claim that tailor-made goods should be excluded from the aggregate value of clearances and that the mere cutting of wires did not constitute manufacture. The court agreed that the authorities did not adequately address these defenses. The court highlighted that the Tribunal's general observations were insufficient to substantiate a charge of suppression and that specific findings were necessary to support such a conclusion.Conclusion:The court concluded that the authorities below did not adequately address the vital issues raised by the appellant. The court set aside the impugned order and remanded the matter to the Adjudicating Authority for a fresh decision. The Adjudicating Authority was instructed to consider the matter anew, uninfluenced by the court's observations, and to pass a fresh order after giving the appellant a due opportunity for a personal hearing. The appellant was granted the liberty to raise all defenses previously articulated. The Civil Miscellaneous Appeal was disposed of accordingly, with no order as to costs.